984 F.

2d 58

FILANTO, S.P.A., Plaintiff-Appellant,

v.
CHILEWICH INTERNATIONAL CORP., DefendantAppellee.
No. 402, Docket 92-7657.

United States Court of Appeals,

Second Circuit.
Argued Nov. 13, 1992.
Decided Jan. 19, 1993.

Richard N. Chassin, New York City (Joseph D. Becker, Michael J. Lane,

Becker, Glynn, Melamed & Muffly, on the brief), for plaintiff-appellant.
Allen N. Ross, New York City (Lawrence J. Profeta, Warshaw Burstein
Cohen Schlesinger & Kuh, on the brief), for defendant-appellee.
Before: NEWMAN, KEARSE, and CARDAMONE, Circuit Judges.
JON O. NEWMAN, Circuit Judge:

This appeal presents a variation on the recurring issue of whether a district

court's order requiring arbitration is appealable. The precise question is whether
such an order is appealable when it is entered in a lawsuit brought on the
underlying dispute, the complaint is not dismissed, but the case is nonetheless
marked "closed." The issue arises on the purported appeal of Filanto, S.p.A.
("Filanto") from the May 21, 1992, judgment of the District Court for the
Southern District of New York (Charles L. Brieant, Chief Judge), 789 F.Supp.
1229 (S.D.N.Y.1992). We conclude that the appeal is premature, and
accordingly dismiss the appeal.

Background
2

Defendant-appellee Chilewich International Corp. ("Chilewich") is a New

York-based import-export company. In 1989, Chilewich contracted to sell
footwear to Raznoexport, then a Soviet Government entity. This contract (the

"Russian Contract") specified that all disputes would be resolved by arbitration

before the Moscow Chamber of Commerce and Industry. To fulfill its
obligations under the Russian Contract, Chilewich contracted with Filanto, the
largest Italian manufacturer of shoes and boots. There is some dispute as to the
content and time of formation of that contract. Chilewich contends that a March
13, 1990, letter it sent to Filanto contains the essential terms of the contract.
This letter provided that the Russian Contract was "incorporated ... as far as
practicable," and specifically indicated that any arbitration should be in
accordance with that contract. Filanto contends that it never accepted these
terms, and that a contract was formed only by conduct at a later date. Under
applicable principles of international law, Filanto contends, such a contract
would not include any arbitration provisions.
3

In January 1991, Chilewich refused to accept 90,000 boots, causing Filanto to

incur a substantial loss. Filanto filed a breach of contract suit in the District
Court for the Southern District of New York, invoking jurisdiction on the basis
of diversity of citizenship. Prior to answering, Chilewich moved to stay the
proceeding pending arbitration in Moscow. The District Court concluded that
various actions by Filanto estopped it from denying the existence of an
agreement to arbitrate, and directed the parties to arbitrate their dispute before
the Chamber of Commerce and Industry in Moscow, Russia.

Somewhat less clear is whether the District Court then intended to retain
jurisdiction or to dismiss the action. In his written opinion, Chief Judge Brieant
concluded that he had the power to stay the action, but that "to do so in this
case would serve no purpose," and that "[a]ccordingly, it is appropriate that a
final judgment issue here containing a mandatory injunction to arbitrate." 789
F.Supp. at 1242. But on the separate document submitted for his signature as
the judgment of the District Court, Judge Brieant drew a line through the
sentence that would have read: "ORDERED, ADJUDGED AND DECREED
that plaintiff's complaint be and hereby is dismissed." The judgment, as
entered, ordered only arbitration and did not dismiss the complaint. The docket
entries, however, reflect that the case was "closed" on May 21, 1992.

Discussion
5

When Congress in 1988 added a new provision governing appeals of orders

concerning arbitration, see Pub.L. 100-702, tit. X, 1019(a), 102 Stat. 4642,
4670-71 (1988), codified at 9 U.S.C. 16 (Supp.III 1991), 1 it endeavored to
promote appeals from orders barring arbitration and limit appeals from orders
directing arbitration. However, Congress did not implement this policy fully.
Instead, Congress built upon the distinction the courts had previously

recognized between so-called "independent" proceedings and so-called

"embedded" proceedings and authorized the following regime for appeals:
6

(a) If the suit is "independent," i.e., the plaintiff seeks an order compelling or
prohibiting arbitration or a declaration that a dispute is arbitrable or not
arbitrable, and no party seeks any other relief, a final judgment ending such
litigation is appealable at once. 9 U.S.C. 16(a)(3); Matter of Chung and
President Enterprises Corp., 943 F.2d 225, 227-29 (2d Cir.1991); Stedor
Enterprises, Ltd. v. Armtex, Inc., 947 F.2d 727, 731 (4th Cir.1991). If
arbitration has been ordered, the objecting party need not await the outcome of
the arbitration before challenging the order to arbitrate.

(b) If the suit is "embedded," i.e., a party has sought some relief other than an
order requiring or prohibiting arbitration (typically some relief concerning the
merits of the allegedly arbitrable dispute), orders denying arbitration are
immediately appealable, 9 U.S.C. 16(a)(1)(A)-(C), (a)(2); see Haviland v.
Goldman, Sachs & Co., 947 F.2d 601, 604 (2d Cir.1991) (appeal of antiarbitration order in embedded case), cert. denied, --- U.S. ----, 112 S.Ct. 1995,
118 L.Ed.2d 591 (1992); Com-Tech Associates v. Computer Associates
International, Inc., 938 F.2d 1574, 1576 (2d Cir.1991) (same), but orders
directing arbitration are not immediately appealable, 9 U.S.C. 16(b);2 see
McDermott International, Inc. v. Underwriters at Lloyds Subscribing to
Memorandum of Insurance No. 104207, 981 F.2d 744 (5th Cir.1993) (appeal of
pro-arbitration order in embedded case dismissed); Perera v. Siegel Trading
Co., 951 F.2d 780, 784-86 (7th Cir.1992) (same). In the latter circumstance, the
party opposing arbitration cannot challenge the arbitration requirement until the
arbitration has occurred and its result is available for challenge on a motion to
confirm or vacate the award. In effect, the pro-arbitration tilt of the statute
requires that, with respect to embedded actions, the party opposing arbitration
must bear the initial consequence of an erroneous district court decision
requiring arbitration.

This case presents a classic example of an embedded proceeding. Filanto sued

on a contract, and Chilewich moved to stay the proceedings pending
arbitration. The District Court, having concluded that the parties made an
agreement to arbitrate and that the chosen location was not "seriously
inconvenient," see The Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 16, 92
S.Ct. 1907, 1916, 32 L.Ed.2d 513 (1972) (forum selection clauses), directed the
parties to arbitrate. Because the District Court declined to dismiss the
complaint, see Borden, Inc. v. Meiji Milk Products Co., 919 F.2d 822, 826 (2d
Cir.1990) (district court may retain jurisdiction over action subject to
Convention on the Recognition and Enforcement of Foreign Arbitral Awards),

cert. denied, --- U.S. ----, 111 S.Ct. 2259, 114 L.Ed.2d 712 (1991), its order
compelling arbitration is not appealable under 9 U.S.C. 16(b)(3).3
9

We see no jurisdictional significance to the docket entry marking the case as

"closed," which we will assume was made for administrative or statistical
convenience. See Corion Corp. v. Chen, 964 F.2d 55, 56-57 (1st Cir.1992)
(direction of district court "that the case be 'administratively closed' pending
arbitration ... [not] equivalent to a final judgment of dismissal"); Campbell v.
Dominick & Dominick, Inc., 872 F.2d 358, 360 (11th Cir.1989) (order closing
case for statistical purposes did not render action final). The closing of the case
without an adjudication of the complaint did not place the complaint in some
sort of jurisdictional limbo and did not render the arbitration order available for
immediate appeal. The complaint in the embedded action, not having been
adjudicated, remains within the jurisdiction of the District Court, regardless of
the effort to tidy up the docket card.

Conclusion
10

The appeal is dismissed for lack of appellate jurisdiction.

From 1988 to 1990, this provision was codified at 9 U.S.C. 15. See Pub.L.
101-650, 325(a), 104 Stat. 5089, 5120 (1990) (renumbering 9 U.S.C. 15 to
9 U.S.C. 16)

An appeal might be specifically allowed pursuant to 28 U.S.C. 1292(b)

(1988). In the absence of certification, however, the barrier to appeal cannot be
circumvented by the collateral order doctrine, whether the order compels
arbitration, see Steele v. L.F. Rothschild & Co., 864 F.2d 1, 3 (2d Cir.1988), or
refuses to stay an action pending arbitration, see McDonnell Douglas Finance
Corp. v. Pennsylvania Power & Light Co., 849 F.2d 761, 764 (2d Cir.1988)

Had the complaint been dismissed, it is arguable that an appeal would be

immediately available, though the relief might be limited to vacating the
dismissal, reinstating the complaint, and declining to review at that stage the
order directing arbitration. But see McCowan v. Dean Witter Reynolds Inc.,
889 F.2d 451, 453 (2d Cir.1989) (reference of claims to arbitration in
embedded proceeding unappealable despite District Court's statement that it
had granted motion to dismiss)